Belarusian President Alexander Lukashenko and Russian President Vladimir Putin have a difficult relationship

By bne IntelliNewsAugust 13, 2018

Belarusian President Alexander Lukashenko believes that the Russian leadership acts in "a barbaric way" towards Minsk, considering his country to be like "their vassals" amid reports that Moscow intends to limit its credit support and oil subsidies to Belarus.

"We are going through a difficult period now - Russians are acting in barbaric way towards us. I say that publicly," state news agency BELTA quoted Lukashenko as saying on August 10. "They make demands like we are their vassals."

According to Lukashenko, Moscow refuses to honour their own commitments within the framework of the Eurasian Economic Union "where they invited us". "Thus, they create a non-competitive situation,” he added, pointing that at the same time, Russia blames the West for creating a non-competitive advantage.

Oil and gas prices have been a source of tension between the allies and Belarus and Russia have been negotiating on the price the gas price for 20 years. Minsk is seeking to secure long-term intergovernmental agreements with the aim of obtaining Russian natural gas at the same prices the Russian consumer pays, while Moscow points out it is giving huge energy subsidies to Belarus already.

In 2017, Russia was demanding that Belarus repay around $550mn for natural gas previously supplied by the state-controlled company Gazprom. Minsk bought Russian gas for $132 per 1,000 cubic metres, but it unilaterally lowered the price to under $80, saying this was a fair price trigging a debt row.

The debt row triggered a rapid escalation of measures by both sides. Since the start of July, Russian oil pipeline monopoly Transneft pumped some 40% less oil to Belarus than in the second quarter because of the claimed debt to Gazprom. Belarus in turn raised fees for the transit of Russian oil across its territory.

"They [the Russians] are treating us the same way as they are creating non-competitive terms for us. This is a matter of our discussion with the Russian president. Anyway, we should work in the given conditions," Lukashenko added.

The statement appeared against a background of media reports that Moscow intends to limit its credit support and oil subsidies to Belarus. According to Reuters, Russia is going to cut exports of refined oil products to Belarus in a bid to curtail re-exports from the country, which come at the expense of the Russian budget.

Russia is supplying Belarus’ two refineries with around 18mn tonnes of crude oil a year to help its neighbour meet domestic needs. Supplies are not subject to export duties as Moscow and Minsk have a joint customs zone, meaning that Russia is effectively supporting its neighbour with cheap energy.

In the past few years, Belarus has also increased imports of refined products from Russia, which are also free of duties, while increasing re-exports of refined products to European countries such as Poland and Germany, Reuters reported on August 10.

Russia is now seeking to effectively curtail re-exports of its refined products via Belarus by imposing limits on the volumes that can flow from Russia to Belarus after September 1. "Russia is imposing a ban on unlimited shipments of refined products to Belarus, arguing that it is facing lower budget revenues as volumes keep growing," Belarusian state energy company Belneftekhim wrote in a note commenting on upcoming changes.

It said Russia had asked Belarus to compensate for its budget losses for past supplies of refined products but gave no figure.

Multi-billion subsidies

Providing oil subsidies to Belarus cost Russia's budget $22.3bn in 2011-2015, the Kremlin said in February. "Russia has provided and continues to provide wide-ranging economic, political and other assistance to Belarus, considering the special allied nature of our relations," the Kremlin said in a statement. "From 2011 until 2015, between 18 million and 23 million tonnes of oil was supplied to our Belarusian partners duty free. As a result, during that period, the Russian budget was off by $22.3bn. All of this is nothing if not direct and indirect support for Belarus."

Russia also intends to suspend the allocation of new tranches from $2bn support package agreed between Minsk and the Russia-led Eurasian Fund for Stabilisation and Development (EFSD) in 2016, as well as suspend negotiations on a new $1bn intergovernmental loan, according to Reuters.

The new conflict with Russia has erupted against a background of an unprecedented crackdown by the Belarusian authorities against the nation's independent media. Over the past week, more than 10 local journalists and Minsk-based German's Deutsche Welle reporter were briefly detained, their offices and homes raided by law enforcements.

According to the country's main law enforcement agency, the Investigative Committee, journalists are suspected of the unauthorised use of BELTA’s behind the pay-wall information, which had allegedly “caused damage to the news agency” and "undermined its business reputation".

Minsk's actions could lead to deterioration of its relations with the European Union (EU) and US. Specifically, the EU's high representative for foreign affairs and security policy Federica Mogherini said that the detentions of journalists are in "contradiction with Belarus’ stated policy of democratisation and its international commitments".

"The EU is committed to a stable, democratic and prosperous future for Belarus, for the benefit of its people, and will continue its work with all the stakeholders with this objective firmly in mind, Mogherini added. "In this context, continued support for independent media will remain essential."

On August 9, the US embassy in Minsk urged the government of Belarus "to keep its international commitments by respecting fundamental rights and freedoms, including freedom of expression and of media."

"The United States will continue to closely monitor this situation and joins calls for the government of Belarus to immediately release all journalists to guarantee the rights of citizens to free speech and media freedom," the embassy’s statement reads.

The EU, US and international human rights organisations are unhappy about the current mass detention of journalists in Belarus, which followed three years of "normalisation" in relations with Minsk. However, local experts question the fact that the Belarusian leadership was ready for real improvements in relations due to the fact that the West can't offer anything comparable to Russia's financial support and subsidies.

Battered Belarus faces a new economic crisis if Minsk fails to secure full compensation from Russia for losses triggered by the latter’s new energy taxation system (the so-called tax maneuver), the International Monetary Fund (IMF) said in a stateme

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